How To Get A 100% Commercial Mortgage

By: Chris Johns

Are you considering a permanent home for you business, but would prefer not to part with a significant chunk of your liquid assets to finance the move?

A 100% commercial mortgage may hold the answer. Unlike traditional mortgages and many standard business mortgages, a 100% commercial mortgage requires no down payment, so you don't have to pay out cash in a big chunk up front. This can be a major advantage if you're just getting a business off the ground, or if you simply need to keep your cash assets liquid.

How a 100% Commercial Mortgage Works

Like any other mortgage, whether it be residential or for business purposes, a 100% commercial mortgage is a secured loan. That means that you put up property or assets as a guarantee that you will repay the loan. If you miss payments or default on the loan, the lender has the right to take possession of your assets and liquidate them to get its money back.

In the case of a commercial mortgage, that security is generally the property for which the loan is sought. In addition, some banks may require additional collateral in the form of other property or assets before they'll approve your application.

If you are taking a 100% commercial mortgage to start a business, your bank or building company will nearly always require that you file a business plan which their lending officers will evaluate before deciding whether or not to lend you money.

Why Choose a 100% Commercial Mortgage?

The best reasons for choosing a 100% commercial mortgage, of course, arise from the fact that there is no need to put down an up-front payment on your property. There are many reasons why a business owner would decide to pay higher interest rates in return for a 100% finance deal.

- Your business may not have the capital to provide a down payment, but does have assets that can be provided as security.

- When you take out a 100% commercial mortgage, your cash assets are available for other purposes to build your business.

- Your cash assets can continue to accrue interest or be used for investment purposes rather than being spent.

- You keep a portion of your assets liquid to meet unexpected expenses.

- Interest payments on your mortgage can be offset against taxes.

With a 100% commercial mortgage, you generally trade a higher interest rate and higher monthly payments for the advantages of holding on to your cash assets longer.

What Are the Disadvantages of a 100% Commercial Mortgage?

The most obvious disadvantages of deciding to take a mortgage with no down payment required have to do with paying more interest on your loan.

- Since you are not putting down a significant amount of the purchase price for your business property, you will be taking out a loan for more money. That means that you'll be paying interest on a larger sum.

- Since you are borrowing more money, you will probably be making higher monthly payments to pay off your loan in the same amount of time.

- Banks and finance companies often charge higher interest rates on 100% mortgages, since they are substantially riskier for the bank.

That means, of course, that you will have to bring in more per month in order to meet your mortgage payment before your business can show a profit.

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